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We wrote here recently that as Apple shares go, so goes the U.S. stock
market. How has the stock fared? Last week there was quite a bit of
excitement when the broad-tosserswho manipulate the stock
for a living short-squeezed the bejeezus out of it
after the close, leveraging a strong earnings report that could have
surprised only Wall Street’s clueless analysts. Moments after the news
hit the tape, AAPL gapped up 9% in a blink,
recouping two-thirds of the losses it had suffered the previous two weeks,
when it plummeted $90 from an all-time high at $644. From a technical
standpoint, what was interesting about the decline is that it reversed from
within 29 cents of a “Hidden Pivot” correction target we’d
disseminated to subscribers a few days earlier. For if the stock had exceeded
that number by more than a couple of dollars, it would have held bearish
implications for the short-to-intermediate-term. However, because the pivot
survived, there was no way to judge the mettle of bulls until Apple rallied
out of the hole.

This it did, in spectacular fashion, with last week’s gargantuan
short squeeze. The goosing instantly added $50 of value to each share of the
world’s most valuable company. Nothing like a little volatility to keep
the crowds coming back for more, right? Putting aside the comical spectacle
of a $600 billion whale flopping around wildly in NASDAQ’s bathtub, the
rally put Apple shares in play once again as a bull-market bellwether. That
said, we have our doubts that new all-time highs
will be achieved any time soon. Notice in the chart how last week’s
gap-up rally, powerful as it was, narrowly failed to surpass peak #1. If
buyers had more guts, shouldn’t they have taken on that last, niggling
resistance before settling back triumphantly? That’s the way we look at
it, and although the logic may seem somewhat subjective, it becomes less so
in the context of tens of thousands of similar patterns we have observed over
the years. To put it simply, stocks that are about to come roaring back
– and in Apple’s case, leap to new highs – do not hesitate
in this way.

What to Look For

Not that we see the AAPL falling apart. Far from it. It’s still
a great company with spectacular margins and business that is growing around
the world. But it would be no surprise to us if the bullish trajectory flattens, leaving Apple’s price little changed six
months from now. Meanwhile, we’ll be watching closely for signs that
the world-beating manufacturer hasn’t lost its mojo after all. What
would it take to put shorts on the run again? Most immediately, a pop this
week above the “external” peak #2 labeled in the chart. In the
parlance of Hidden Pivot Analysis, this would “refresh the bullish
impulsiveness” of the hourly chart. If, on the other hand, the stock is
unable to muster the required push, look for it to meander the summer away.
Although that would reduce the odds of a stock-market crash before the
election, it would also restrain the Dow Average from wafting toward all-time
highs near 14,000 recorded in 2007.